Transcript
PRICING
Questions to answer1. What is the price you pay for your apartment?-rent2. What is the price you pay for your education?-tuition3. What is the price you pay to your doctor or
dentist?-a fee4. What is the price you pay to the airline, taxi and
bus companies?-a fare5. What is the price you pay for the local services?-a rate
Questions to answer6.What is the price you pay for the money you borrow?-charges and interest7. What is the price you pay for driving your car on a
motorway?-a toll . What is the price you pay to the company that insures
you?-premium9. What is the price you pay to the guest speaker?-an honorarium10. What is the price paid to the government official to
help some character steal?
Questions to answer
8-a bribe11. What is the price collected by the trade union?-dues12. What is the price you pay to your regular lawyer to
cover his/her services?-a retainer13. What is the price of an executive?-a salary14. What is the price of a salesperson?-a commission15. What is the price of a worker?-a wage
The role and perception of price
Price is the value that is placed on something.
Price is any common currency of value to both buyer and seller.
Price directly generates the revenues, serves as a communicator, a bargaining tool and a competitive weapon.
The customer’s perspective
Price represents the value they attach
to whatever is being exchanged.
In assessing price, the customer is
looking specifically at the expected
benefits of the products:
Personal
Financial Operational
Quality
Functional
Priceassessment
The seller’s perspective
Profit = Total revenue – Total cost
Total revenue = Quantity sold *
Unit price
Total cost = Production cost +
Marketing cost + Selling
cost
Psychological effects of price
Low price = negative statement about the product’s quality.
A sudden reduction in price of an established product = quality has been compromised.
High price might actually attract customers.
External influences on pricing
1. Customers and consumers
2. Demand and price elasticity
3. Channels of distribution
4. Competitors
5. Legal and regulatory framework
External influences on pricing
1. Customers and consumers
The bigger the area, the more discretion the marketer has in setting price.
What the market will tolerate
COSTS
External influences on pricing
2. Demand and price elasticity Demand determinants
Changing consumer taste and needs Recession Competitors’ products and price
Price elasticity of demand Sales respond to price variations: elastic. Sales stable after price change: inelastic.
External influences on pricing
3. Channels of distribution
External influences on pricing
4. Competitors: Monopoly: only 1 supplier - rare Oligopoly: a small number of powerful
providers dominate the market. Monopolistic competition: competitors,
each with differentiated product. Perfect competition: competitors, each
with products undistinguishable - rare
External influences on pricing
5. Legal and regulatory framework: Watchdog bodies
Internal influences on pricing
1. Organisational objectives
2. Marketing objectives
3. Costs
Internal influences on pricing
1. Organisational objectives Corporate strategy: target volume
sales, target value sales, target growth, target profit figures
Market leader or niche New entrant or established Can be both short-term and long-term
Internal influences on pricing
2. Marketing objectives Focus on specific target markets and
the position desired with them. Depends on product’s life cycle:
Intro. stage: lower price - invite trial Growth & early maturity: raise price Late maturity & decline: price reduction
Internal influences on pricing
3. Costs Total costs include:
Operating and Servicing costs
A product’s selling price generally represents: Its total cost (unit cost plus overheads), & Profit or “risk reward”
The process of price setting
Demandassessment
Pricing objectives
Pricing policies & strategies
Setting theprice range
Pricing tactics& adjustments
1. Pricing objectives
Financial objectives: short/long-term Sales and marketing objectives
Market share and positioning Volume sales Status quo: preserve the status quo –
happy with current situation Price war (undercutting), price matching,
improve product / service / communication
Survival
2. Demand assessment
Marketers need to assess demand
levels for a product at any given price.
This involves a great deal of
managerial skills as there are many
variables.
3. Pricing policies and strategies New product pricing strategies
Price skimming: high price, then lower Penetration pricing: low price, then high up
Product mix pricing strategies: A product range starts with basic products,
then price steps up with additional features Managing price changes:
Price are not static because of competitive pressure, Cost inflation, new opportunities
4. Setting the price range The cost-volume-profit relationship
Fixed costs Variable costs Marginal costs Total costs
Setting the price range Cost-based method Demand-based method Competition-based method
The cost-volume-profit relationship
Fixed costs: do not vary with output in the short term (salaries, rent, etc.)
Variable costs: vary according to the quantity produced (raw materials, etc.)
Marginal costs: change that occurs to total cost if 1 more unit is added
Total costs: all the cost incurred Breakeven analysis: the point at which
total revenue = total cost
A. Cost-based methods
Mark-up price = costs + profit (giá cộng lời vào vốn)
Cost-plus pricing = costs + fix % (định giá có lãi)
Experience curve pricing (định giá theo đường cong kinh nghiệm)
B. Demand-based pricing
When demand is strong, the price goes up; when it is weak, the price goes down.
Need a good understanding of the nature and elasticity of demand.
Psychological pricing: customer-based Rely on the consumer’s emotive responses,
subjective assessments and feelings. Applicable to higher involvement products.
C. Competition-based pricing
Depends on: The structure of the market The product’s perceived value in the market
Can be: Cost-leader with price-oriented approach Price-follower bases on the going-rate for
the product
5. Pricing tactics and adjustments
Price can vary to reflect specific customer needs, the market position.
Marketers should set up a framework for pricing discretion.
Special adjustments can be made for short-term promotional purposes
Discounts, allowances, trade-in Zoned pricing: single, multiple zones
Thank you very much!!!
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